Welfare (2 problems)

The table below shows the total benefits and costs of five possible plans (each of increasing scope) for a hospital to be built on a particular site.

a) Indicate which plan should be adopted, using the marginal benefit equals marginal cost rule.

b) Confirm your answer in part (a) by computing each project's net benefit.

In each case below, identify the spillover effect being described.

a) Pollutants from a nearby factory are contaminating lake Bluewater. Cottage owners along the lake are outraged.

b) A new anti-flu vaccine proves to be harmful to seniors.

c) In a particular suburb, residents lobby against a land fill site.